VIB - Strong NOII; credit costs surge YoY - Earnings Flash

VIB released its 2023 results with NPAT-MI of VND8.6tn (USD354mn; +1.1% YoY), achieving 89% of our FY2023 forecast. These results imply Q4 2023 NPAT-MI of VND1.9tn (-14.2% YoY & -11.4% QoQ). Overall, the top line results tracked ahead of our expectations partly due to strong NOII from credit cards, FX trading, and recovery from written-off bad debts. However, credit costs beat our forecasts, which was due to VIB’s strategy to accelerate writing off bad debts to control its NPL ratio. We see potential downside risks to our current earnings forecasts, pending a fuller review. At the Q4 2023 analyst meeting, VIB stated it expects 2024F earnings growth of 10%-15% YoY. 

• 2023 credit growth was 14.2% YoY vs our full-year forecast of 12.0% YoY, which was mainly driven by corporate lending. As of 2023, 85% of VIB’s lending portfolio was retail (vs 90% in 2022). Additionally, corporate bonds accounted for only 0.3% of VIB’s 2023 credit exposure and were issued by manufacturing and services companies. The bank also stated that its 2024 credit quota is more than 16% and management expects 2024F credit growth of more than 20% if receiving additional credit quota. 
• 2023 deposit growth was 18.2% YoY, which was driven by a 21% YoY growth in retail deposits. Additionally, the 2023 CASA ratio was 13.4% (relatively flat QoQ and YoY), which was partly contributed by a 33% YoY increase in retail CASA. 
• 2023 NIM was flat YoY at 4.70%, which is lower than our full-year forecast of 4.93%. We believe this was mostly due to stronger-than-expected credit growth in late 2023 that deflated Q4 2023 NIM. At the analyst meeting, management stated it expects to control NIM at around 4.4%-4.7% in the next few years. 
• 2023 NOII was VND4.8tn (+55.1% YoY), completing 126% of our full-year forecast. 2023 recovery from written-off bad debts increased 84% YoY. Additionally, VIB recorded VND678bn of fee income from FX trading and investment activities in 2023 vs losses of VND451bn in 2022. Management stated that VIB has not recorded any one-off income from banca in 2023 yet. 
• 2023 CIR was 30%, which has continually improved since 2017. 
• Q4 2023 NPL ratio improved moderately by 54 bps QoQ to 3.14% vs our full-year forecast of 2.91%. 94% of 2023 NPLs were from retail customers, in which 67% were mortgages, 11% were auto loans, and 22% were other retail loans. In addition, the Group 2 loan ratio improved 88 bps QoQ, but remained high at 5.57% in Q4 2023. Restructured loans under Circular 02 over gross loans was 0.34%, which was much lower than the peak during COVID-19 of around 1%. The bank expects the 2024F NPL ratio to improve YoY.
• 2023 provision expenses surged nearly 3x YoY and completed 173% of our full-year forecast. The 2023 write-off rate was 1.36% (vs 0.27% in 2022), which tracked well ahead of our full-year forecast of 0.78%. In addition, VIB’s LLR improved 9.6 ppts QoQ to 51.0% in Q4 2023 (-2.9 ppts YoY). VIB stated that 91% of its loan book was secured and most of written-off bad debts were also secured. 
• 2023 CAR was 11.7% and short-term funding to medium and long-term lending was 27% (vs the regulated cap at 30%).
• At the analyst meeting, management said it expects a regular dividend payout ratio of 30%-40% of annual earnings in the coming years and an annual stock dividend of around 15%-20%.  

VIB’s consolidated 2023 results

Source: VIB, Vietcap — *CASA volume included demand deposits and margin deposits; ** Q4 2022 and Q4 2023 loan and deposit growth is QoQ growth; 2022 and 2023 loan and deposit growth is YoY growth.

Powered by Froala Editor